Why in the News?

Funds spent by listed companies on Corporate Social Responsibility (CSR) rose by 16% to Rs 17,967 crore in 2023-24, in comparison to 2022-23.

What’s in Today’s Article?

• About CSR (Meaning, Objective, etc.)
• CSR Spending in FY24 (Statistics, Leading Contributors, Sectoral Allocation, Trends, etc.)

About Corporate Social Responsibility:

• CSR has become a central pillar of India's corporate governance framework.
• Enacted through the Companies Act, 2013 and enforced from April 2014, CSR mandates eligible companies to spend at least 2% of their average net profits over the preceding three years on socially impactful initiatives.
• Companies with a net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more are obligated to undertake CSR activities.
• The intent behind the CSR mandate is twofold:
  • to ensure that businesses contribute meaningfully to society, and
  • to embed social responsibility as an integral part of corporate strategy.
• Over the years, CSR in India has expanded to include areas like education, healthcare, rural development, environmental sustainability, and cultural heritage.
• While compliance levels have consistently improved, recent trends suggest an evolving landscape where corporates are increasingly aligning their CSR strategies with sustainable development goals and national priorities.

Rise in CSR Spending in FY24

• In the financial year 2023-24, India witnessed a 16% surge in CSR spending, with listed companies investing a total of ₹17,967 crore, up from ₹15,524 crore in FY23​​.
• This significant rise mirrors the 18% increase in average three-year net profits, which grew to ₹9.62 lakh crore from ₹8.14 lakh crore​.
• As per the CSR mandate, companies were required to spend ₹18,309 crore.
• The slight shortfall between required and actual spending was due to ₹2,329 crore being transferred to Unspent CSR Accounts for future utilization​.
• This increase in spending came after three years of relatively flat growth, signalling a strong corporate commitment towards social welfare, driven by regulatory push and profit expansion.

Sectoral Allocation of CSR Funds

• CSR funds were predominantly directed towards key societal needs:

• Education remained the top priority, attracting ₹1,104 crore.
• Healthcare followed closely, receiving ₹720 crore​​.

• Notably, spending on environmental sustainability saw the steepest increase, with a 54% growth compared to the previous year.
• Meanwhile, areas like slum development (-72%), rural development (-59%), and armed forces veterans’ welfare (-52%) witnessed significant declines​.
• This sectoral shift indicates a growing awareness and responsiveness among corporates towards environmental challenges and the sustainable development agenda.

Trends in Compliance and Governance

• Corporate compliance with CSR norms continued to remain robust:
  • 98% of the 1,394 eligible companies fulfilled their CSR obligations​.
  • Around 49% of the companies exceeded their mandated spending, reflecting a proactive approach.
  • Only 259 companies fell short of the spending requirement, mainly due to multi-year project planning​.
  • Public Sector Undertakings (PSUs) also enhanced their contribution, with 66 PSUs spending ₹3,717 crore, marking a 19% increase from the previous year​.
• Governance around CSR has also improved. Companies spending over ₹50 lakh must form a CSR Committee comprising at least three directors, including one independent director.
• Among the 1,028 companies mandated to set up committees, 990 had fully compliant structures​.

Call for Revising CSR Thresholds

• Given the significant rise in average corporate profits over past decade, experts have called for a revision of CSR eligibility thresholds.
• The original thresholds were set when the average three-year net profit was ₹4.18 lakh crore; now it has more than doubled to ₹9.62 lakh crore.
• Revising these limits would help focus CSR mandates on larger entities and ease regulatory burdens on smaller companies.

Future Outlook

• As India's economy grows, CSR is expected to evolve from being a compliance obligation to a strategic pillar for brand building, social impact, and stakeholder trust.
• Emerging focus areas are likely to include:
  • Climate change mitigation
  • Digital inclusion
  • Skilling for the future workforce
  • Healthcare innovations
• Greater integration of CSR initiatives with corporate business strategies and national development programs will further enhance their effectiveness and impact.